Going private may mean going fabless

Analog Devices Inc. CEO Gerald Fishman has seen a lot in his 35-year run in the semiconductor business. The sudden influx of private-equity money doesn't stop him in his tracks. But he believes the trend toward taking large semiconductor companies private almost surely will push any that are still holding onto fabs to go fabless. That's because the cost of building digital fabs today is prohibitive.

"When you start looking at $3 [billion] to $4 billion to put up a fab, and you look at the companies who can put up the scale in the U.S. to be able to absorb that kind of investment--it's a very short list," Fishman said. As more fabbed chip companies go private, the pressure to reduce costs and leverage a world-class foundry infrastructure will mount, he added.

In an interview last week, Fishman withheld judgment on whether private equity is good or bad for the industry. "Historically, technology has not been a great private-equity investment. But for the overall industry, the growth rate has slowed. And the cash generation of companies is tremendous," he said. ADI has roughly $2 billion in cash on hand.

Fishman declined to say whether ADI has been approached about going private. The Norwood, Mass., company, whose stock is trading at around $30 a share, is considered a target for a private-equity buyout.

While going private has its benefits in managing a company, it's not a panacea, he acknowledged. "Your boss changes," Fishman said, from public stockholders to "private-equity guys. It's easier in that you're out of the [Wall Street] spotlight. On the other hand, you have a pile of debt you have to pay back every month. You never control your own destiny."